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There is a buzz from the sidelines of the foreign
exchange market that the IMF is considering classifying the
Australian and Canadian dollars as reserve currencies. This is a
misleading way to characterize what is happening.
It is already well documented that a number of central banks,
including German, Swiss, and Russian central banks have added one
or both of those currencies to reserves. There can be no
doubt that the Australian and Canadian dollars are minor reserve
currencies.

The IMF is the most authoritative source of information about the
composition of reserves. It publishes its COFER (Currency
Composition of Official Foreign Exchange Reserves) at the end of
every quarter, with a quarter lag in the data. It breaks out five
currencies presently, US dollar, euro, sterling, yen and Swiss
franc.
There is a catch-all category "other" that include the Australian
and Canadian dollars. The "other" currencies have increased to
5.3% of the reserves in which the currency allocation is
provided, up from 2% at the end of 2007. The Australian and
Canadian dollars likely account for the bulk of this
increase.The IMF is simply considering breaking out the data for
the Australian and Canadian dollar. It is technical not
substantive. It does not make them more or less
attractive as reserve currencies. At most, it is recognition of
what central banks have already done. Their usage has reached a
critical mass where it might make sense to list them
separately.What is noteworthy is what is not being
considered. Despite all the talk of "currency wars" and the
internationalization of the yuan, the Chinese currency has made
practically no head way as a reserve currency. To the
extent there has been diversification of reserves away from
dollars and euros, the Australian and Canadian dollars have been
the beneficiaries, much more so than China.